NRG reorganization lets GenOn determine future of Avon Lake power plant

By MICHELE MURPHY

AVON LAKE – Whether the Avon Lake power plant remains open or closes in the coming months will again be up to GenOn Energy Inc.

The future of the coal-burning power plant that has operated on Lake Road since 1926 is murky because New Jersey-based NRG announced in July a major corporate reorganization that allowed GenOn Energy, a wholly owned subsidiary of NRG, to file Chapter 11 bankruptcy.

NRG spokesperson David Gaier said in an email last week that when GenOn emerges from bankruptcy, which is expected later this year, GenOn will be a stand-alone entity and no longer part of NRG.

Gaier said that because the Avon Lake plant is owned by GenOn, its future will be determined by GenOn after its emergence from bankruptcy, at which time it will have new owners.

However, Avon Lake mayor Greg Zilka said he spoke last Thursday with James Samuels, a Columbus-based consultant for NRG, who assured the mayor the plant would remain open for at least three years based on a contract the utility has with PJM that runs to 2020. PJM is a regional transmission company that manages the electricity grid to ensure customers have adequate power supply for their homes and businesses.

According to documents filed with the Security and Exchange Commission in May, the bankruptcy filing is an effort to restructure GenOn’s debt, which was reported to be $1.8 billion. Approval for the debt restructuring and corporate reorganization requires agreement from NRG, GenOn’s debt holders, and any others with a significant financial stake. The documents do not indicate which, if any, plants might close.

In the months before GenOn was acquired by NRG, GenOn announced it was closing the Avon Lake plant and six other of its coal-burning power plants because of environmental regulations.

After NRG acquired GenOn, the utility considered converting the plant to burn natural gas instead of coal. That effort ran into significant resistance from area property owners who fought a natural gas line that was to cross their property because they said their land values would be hurt.

Meanwhile, NRG also sought county and state approval to cut the real estate and business taxes it was paying on the Avon Lake plant. In 2013 and 2014, NRG requested and received two reductions in the business taxes, known as public utility personal property (PUPP) taxes, that it pays on power-producing machinery from $63 million to $14.9 million. In 2015, the utility filed more paperwork to cut its value from $14.9 to $2.8 million. In addition, the company is attempting to have its property values reduced from $54 million to $6.6 million.

When the Ohio Department of Taxation approved two earlier business tax reductions, the Avon Lake school district lost more than $1.2 million in annual revenue. The City of Avon Lake, Avon Lake Library and Lorain County were also lost revenue totaling more than $200,000. Making matters worse, if NRG wins its latest tax reduction case before the state, the schools, city and others will be forced to refund money — potentially more than $2 million —  to cover tax over payments NRG made from 2014 to 2016, the years the valuation figures are contested.

NRG’s tax reduction efforts have drawn strenuous opposition from both Avon Lake city leaders and Avon Lake Schools officials, which is most affected by NRG’s repeated tax reduction requests.

Avon Lake Schools Superintendent Robert Scott said last week the district received a letter from NRG about the bankruptcy filing and school officials are monitoring the situation. Scott said the district has hired an expert who is knowledgeable about the energy field and chapter 11 filings to help them.

NRG cited a number of factors that prompted the move to split from GenOn and pursue the bankruptcy filing. They included flat demand from customers for power the past five years; excess capacity due to insufficient power plant retirements; lower cost structure for competitors and significantly depressed natural gas prices, according to reorganization documents.

The Avon Lake plant is one of a few remaining coal-burning power plants in Ohio. First Energy Corp., which previously owned the Avon Lake power plant, closed three Cleveland-area coal-burning facilities in recent years and are in the process of closing two more, one near Toledo and the other near Steubenville. In March, Dayton Power & Light said it would shut down two coal-fired plants in southern Ohio next year. According to reports, both Dynegy and American Electric Power, which had coal-fired plants in Ohio, have either sold them in recent years or are in the process of trying to sell or convert the plants to gas.

Since the initial plant closing announcement five years ago, city officials and residents have speculated about what could be developed on the 30-acre power plant site that abuts Lake Erie. Avon Lake looked at redeveloping the west end of the city and the plant site. Those plans were shelved when NRG officials announced in 2013 that they planned to continue operating the plant. More recently, the city has partnered with three other lake shore communities, the Lorain County Commissioners and Lorain County Metro Parks to explore ways to increase opportunities for walking and bicycling along the lake.

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